In a bold move against foreign direct investment (FDI) in multi-brand retail, the Aam Aadmi Party government has reversed the decision allowing global chains to set up superstores in the Capital.
The decision, an election promise of the Kejriwal-led AAP, comes more than a year after the
Centre eased norms, arming state governments with the power to allow or prohibit FDI upto 51% in multi-brand retail stores.

The Kejriwal government’s move to roll-back the decision and ban foreign retail chains in Delhi will likely throw one more spanner in the implementation of the policy geared to attract billions of dollars to spur economic growth.

The previous Congress government-led by Sheila Dikshit was among the first in the country to allow multi-national giants to open deep-discount stores. But, scrapping FDI in multi-brand retail is part of the 17-point governance agenda on which the Congress has agreed to give outside support to the AAP government.

The local trading community and major political parties, including the BJP and Left, are opposed to FDI in the multi-brand retail sector, arguing that it would put the livelihood of neighbourhood grocery stores and street vendors at risk.

“The government has reviewed its earlier decision and it has been decided not to support FDI policy in multi-brand retail trade in the NCT of Delhi,” Amit Yadav, Delhi Commissioner of industries wrote in a January 1 letter to the Centre’s department of industrial policy and promotion (DIPP).

Kejriwal clarified that this decision should not be interpreted that AAP favoured a blanket ban on FDI. “AAP is not against FDI. But whatever information is available to us, it clearly shows that while FDI in retail improves consumers’ choices but at the same time it leads to loss of jobs at a very large level,” said Kejriwal.

Multi-brand retail firms and industry associations reacted with dismay. “This direct negation without demonstrating a search for a viable alternative will hamper investment sentiment for the state,” said Sidharth Birla, president of industry association Ficci.

“We continue to study the feasibility of the FDI policy and remain steadfast in our belief in the important value Walmart brings to India,” said a spokesperson of the world’s largest retailer Walmart.

British chain Tesco, which recently announced a 50:50 partnership with the Tata Group for its India foray, said: “We have noted the decision of the state government (of Delhi) and will bear it in mind as we consider our future plans,” a Tesco spokesperson said.

The government had to choose between choices for the consumers and unemployment, Kejriwal said. “In Delhi there is huge unemployment already and we didn’t want to add to it,” the CM said.